November 19th, 2012 04:22 AM

MANILA, Philippines—The Philippines is in a unique spot nowadays, with most macroeconomic indicators showing robust growth and positive sentiment in the business community, translating to better confidence all around.

However, this poses an equally unique situation for people who want to see their investments yield better returns. As the economy improves, domestic interest rates come down with declining risk levels associated with lending. At the same time, the push toward lower interest rates is also being driven by record low interest rates in the United States and Europe, as their central banks keep yields low in the hope of revitalizing their economies.

Where then should Filipino investors place their money to best profit from the financial markets, given these circumstances? The Inquirer’s Doris C. Dumlao and Daxim Lucas asked bankers and investment experts for their opinion on where to invest a hypothetical P150,000 in extra cash, and here’s what they said:

ADVERTISEMENT

Norman Martin Reyes

SVP and head of marketing group

United Coconut Planters Bank (UCPB)

“Right now time deposits rates are not too attractive.

“If you have P150,000, you might want to look at UCPB’s trust banking products. With as low as P10,000, an investor can consider our various Unit Investment Trust Funds (UITF). Depending on the investor’s risk appetite, we can recommend either the United Equity Fund (UEF) or the United Balance Fund (UBF).

“The UEF is suitable for an aggressive type of investor with a long-term investment horizon. To achieve long-term capital growth, this fund invests in domestic, listed equities. This fund’s absolute year-to-date net yield is 16.79 percent. Our compounded annual growth rate (CAGR) for the last three years is 46.5 percent.

“The UBF is suitable for moderately aggressive type of investors. To achieve a balance between long-term capital appreciation and income growth, this fund invests in a mix of domestic, listed equities and fixed income securities. The absolute year-to-date net yield of this fund is 11.36 percent. Our CAGR for the last three years is 27.2 percent.

“We have two other funds that invest in fixed rate securities, namely the United Conservative Fund (UCF) and the United Cash Management fund (UCMF). These funds are less risky and they offer steady income streams but the returns are not as high as the other funds.

“One word of caution though: the UITF is not a deposit account and not insured by Philippine Deposit Insurance Corp. Any reduction in income or principal due to prevailing market conditions is for the account of the investor. Historical performance, when presented, is purely for reference purposes and is not a guarantee for similar future return.

“We also have other investment outlets. For P50,000, we can offer investors our services to purchase UCPB’s LTNCD from the secondary market, which can earn about 5.75 percent based on the present market rate. UCPB’s long-term negotiable certificates of deposit (LTNCD) pay interest quarterly and have a maturity of three to five years. We can also act as a broker and offer corporate bonds on the secondary market at rates better than the prevailing time deposit rates. Interest payouts depend on each bond offering.”

Pascual Garcia III

President

Philippine Savings Bank

“I would suggest mutual fund weighted to equities. Bond funds won’t do well next year. I think interest rates will move a bit higher so bonds won’t do well. Easing will essentially taper off locally and globally.”

Marvin Fausto

Chief investment officer

Banco de Oro Unibank

“Because of the people’s generally busy schedule, I recommend that they choose from the existing UITFs available in the banks, particularly BDO.

“They are professionally managed and offer better returns given the commensurate amount of risk one is willing to take. For the conservative investors, I recommend the Peso Money Market Fund—the fund is very stable and offers better returns compared with the ordinary time deposit.

“For the balanced investors, I recommend the Balance Fund that offers a good mix of investments in fixed income and equities, and for the more aggressive investors, I recommend the Equity Fund so they can participate in the strong long term performance of the Philippine stock market.

“UITFs have, in the past, outperformed comparative investments and are specifically designed to benefit investors over the long term. For P150,000, I believe the UITF is the best investment for you.”

Ma. Theresa Marcial-Javier

Senior VP/head of asset management and trust group

Bank of the Philippine Islands

“Invest in the Philippines. Put P50,000 in a growth-oriented peso equity fund that is positioned in cyclical bets that will benefit from the following investment themes—infrastructure spending, consumer spending, banking and credit cycle upturn.

“Put the next P50,000 in a long-duration peso bond fund as interest rates will continue to stay low for a while.

“Put the remaining P50,000 in a short-term fixed-income fund to provide for unforeseen liquidity requirements as well as a stable income source to protect the portfolio from market swings.”

Wick Veloso

Chief executive officer

HSBC

“Select common share equities with a good revenue story or potential significant growth business plan. Otherwise, go for preferred shares instruments (with good dividend paying history) like the SMC Preferred Shares for a good dividend return. Just go either way.

“Deposits, government bonds and other corporate fixed-income instruments offer very unattractive returns compared to the above mentioned investment opportunities.”

Gina Morales

Executive vice president

Philam Asset Management Inc. (PAMI)

“We believe that the Philippine equity market will continue its winning streak for the next three years as the country’s fundamentals are sustainable, with corporate earnings of listed companies expected to grow as well. With this my recommendation is to invest over the long term in any of PAMI equity-laced funds, namely the Strategic Growth Fund, Philam Fund Inc. and GSIS Mutual Fund Inc., depending on their risk tolerance. These funds are actively managed and have outperformed the index and their peers, and have remained in the top 1 and 2 as compared to other equity funds in the market.

“Also our investment process remains to be our key differentiator versus other fund providers as seen from our consistent track record of performance and having to stay on top of the league tables. We encourage to start investing their hard-earned money in the Philippines given strong long-term growth prospects.

Overall mutual funds are still the investment structure of choice. It fits every retail investor’s needs of starting with something small and bringing the most benefit of generating maximum returns through diversified portfolio which is actively managed by expert fund managers.